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Highlights

As initially announced in the July JofA Highlights, the AICPA and FASB issued a
joint proposal to improve the standard-setting process for the
constituents of private company financial reporting ( www.pcfr.org). The
initiative seeks feedback from owners, preparers, auditors,
lenders, investors and bonding agencies on proposed
enhancements to the board’s standard-setting procedures. The
responses will determine whether the board should consider
expanding GAAP to include differences in accounting standards
for private companies, as was advocated by various
participants in a recent Institute survey. The AICPA and FASB
also would sponsor and fund a joint committee to help the
board ensure the views of private company constituents are
incorporated into the standard-setting process. “The
importance of nonissuers to our capital markets cannot be
overstated,” said AICPA President and CEO Barry C. Melancon.
“Only about 17,000 companies are registered with the SEC, but
more than 20 million are privately held and play a critical
role in job creation and entrepreneurialism.” Comments should
be e-mailed to commentletters@pcfr.org
by August 15, 2006.

The Auditing Standards Board
(ASB) issued Statement on Auditing Standards (SAS)
no. 112, Communicating Internal Control Related Matters
Identified in an Audit, which replaces SAS no. 60,
Communication of Internal Control Related Matters Noted
in an Audit. The new SAS establishes standards and
provides guidance on identifying and evaluating control
deficiencies in an audit of financial statements to determine
the significant deficiencies and material weaknesses that must
be communicated to management and those charged with
governance. The SAS is effective for periods ending on or
after December 15, 2006. It was published in the July issue of
the JofA (Official Releases, page 97), is summarized
at
www.aicpa.org/members/div/ and can be ordered (product no.
060707JA) at www.cpa2biz.com.

The ASB also issued Statement of Position
(SOP) 06-1, Reporting Pursuant to the Global Investment Performance
Standards, which replaces SOP 01-4, Reporting
Pursuant to the Association for Investment Management
Research Performance Presentation Standards, and was
published in the June issue of the JofA. Venture
capital and hedge funds, commodity pool operators and other
investment management companies use the Global Investment
Performance Standards (GIPS) to promote fair representation,
full disclosure and greater comparability in calculating and
presenting investment performance information. Compliance is
voluntary but widely regarded as a competitive advantage.

SOP 06-1 provides guidance to practitioners examining and
reporting on aspects of a firm’s compliance with GIPS—a
verification engagement—and on the investment performance
presentations of specified groups of portfolios—a performance
examination. Auditors should conduct both types of engagements
in accordance with AICPA attestation standards and with
procedures specified in GIPS, which are available from the CFA
Institute (
www.cfainstitute.org/centre/ips/), as are guidance
statements and other interpretation and application aids.
Order the SOP (product no. 014944JA) at www.cpa2biz.com.

The Government Accountability
Office issued an exposure draft (ED) of proposed
changes to generally accepted government auditing standards
(GAGAS), commonly known as the Yellow Book (
www.gao.gov/govaud/ybk01.htm). Although the ED applies to
many aspects of GAGAS, it emphasizes audit quality and ethics
and extensively updates the performance audit standards.
Comments should be e-mailed to yellowbook@gao.gov by
August 15, 2006.

The staff of the Public Company
Accounting Oversight Board Office of the Chief
Auditor issued a series of questions and answers,
Adjustments to Prior-Period Financial Statements Audited
by a Predecessor Auditor (
www.pcaobus.org/standards/staff_questions_and_answers/2006/qa_adjustments.pdf).
If such financial statements require adjustments, the Q&As
say which auditor—the predecessor or the successor—may audit
the adjustments.

The AICPA has joined the U.S. Treasury
Department’s “Simplify” initiative to inform tax
preparers and businesses of the benefits of using the
Electronic Federal Tax Payment System (
www.simplifytaxprep.info). Free software at www.eftps.gov makes it
possible to simultaneously submit many clients’ tax payments
with a single mouse click.

As part of its ongoing program to lead
innovation in management accounting, the AICPA is
collaborating with the American Accounting Association (AAA)
Management Accounting Section to research nonfinancial
performance measures. AAA members will submit proposals on
various aspects of the purposes of supplementing financial
measures with nonfinancial ones; the selection, validation and
reporting of such nonfinancial measures; and the effectiveness
of reporting systems that integrate such measures with their
purely financial counterparts. The Institute will fund up to
$50,000 for one or more projects and select the winning
proposal in September. The research is expected to be
completed in July 2007, and results will be written up in a
final report, a paper for publication in a major academic
journal and an article for the JofA. Guidelines for
submitting a proposal are at
http://aaahq.org/MAS/news/announcements/aicpa_grant.pdf.

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